Even those with high salaries are being turned down for modest amounts because they no longer pass affordability tests.

But personal loans are not covered by the same tough rules, so lenders need only make a few basic credit checks on customers.
This means they are surging in popularity.

Nigel Bedford, of broker Large Mortgage Loans, says: ‘Personal loans are not right for everyone, but for those looking to borrow smaller amounts on their mortgages they can work out quicker and easier than going through a mortgage application under the current rules.’

In some cases, customers turned down for mortgages are being told they can instead take out a personal loan by the same bank. In one example, a couple refused an extra £50,000 on a £100,000 mortgage claim were told by the same bank they could take out £25,000 each with a personal loan.

While mortgage rates have crept up over the past year, banks have been slashing personal loan rates.

This month HSBC cut the rate for loans between £7,000 and £15,000 to 3.9 per cent.
This is less than the average five-year fixed mortgage deal, which now stands at 4.2 per cent, according to data firm Moneyfacts.
However, it applies only to existing current account holders.

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